Container Freight Tariffs for East Indonesia Raised by Shipping Firms

Indonesia's private shipping companies have raised tariffs for container freight to the eastern region of Indonesia by 25 percent. Carmelita Hartoto, General Chairwoman of the Indonesian National Shipowner's Association (INSA), said shipping companies hiked these tariffs as the previous tariffs were set too low.

Previously, Indonesian shipping companies had reduced tariffs for container freight to the eastern part of Indonesia up to 30 percent as part of the government's sea toll road program. This sea toll road program is a maritime program launched by Indonesian President Joko Widodo in 2016 that aims to reduce the country's notoriously high logistics costs, and specifically lower the price gap between the more developed western part of Indonesia and the less developed eastern part of the country.

The sea toll road is part of the government's program to turn Indonesia into a global maritime axis, hence the program also includes the development of 24 modern seaports, including five deep seaports.

The reason why shipping companies, again, raised tariffs for container freight to the eastern part of Southeast Asia's largest economy is because the owners of the goods (that are transported) did not lower their prices, hence prices remained the same for buyers in the eastern part of the country, while the sellers of the goods enjoyed cheaper transportation tariffs.

Earlier, INSA had proposed the government to use private shipping companies for the sea toll road program as this would imply the government would not need to use funds from the state budget for the building of new ships. INSA said it would be easier for the government to offer long-term contracts, or subsidy (for those remote destinations in the eastern part of the country that are not commercially viable), to private shipping firms.

Currently, INSA members, combined, operate around 20,000 ships and serving around 57 big and small harbors across the country.